23 Comments

• Stuart Mitchell 28th Feb '12 - 10:12pm

  “Here’s what ComRes asked: Do you agree or disagree with the following statement? People on high incomes* should pay more in tax in order to take people on the lowest incomes out of tax altogether.”

  I’m afraid that’s just another dodgy opinion poll question. People on “the lowest incomes” (i.e. some part-time workers and people on benefits) are already out of income tax. Further allowance increases will not help them at all. As for taking such people “out of tax altogether”, that would imply giving them an exemption from things like VAT and duties, when of course the opposite is happening.

  Given the wider picture of higher VAT, and cuts in child and working tax credits, I’m afraid the Lib Dems’ “flagship policy” is just the same old “cut one tax, raise two more and hope no-one notices” con job that the Tories elevated to such a fine art in the 1980s.

• Chris_sh 28th Feb '12 - 10:52pm

  Umm, is that the most biased opinion poll question ever? Luckily Com Res did the Lib Dems proud though, a question about whether a group of people who are rich should help people who aren’t, without any reference to what “rich” actually is, but it was a feel good question I suppose.

  However, on a more serious note, the poll actually does show that people have mixed feelings regarding the situation we’re in at the moment. The same poll shows that the majority of people likely to vote Lib Dem also think that the Chancellor should concentrate on business rather than individuals to get the economy going (58%/36%), it also shows that they are evenly split on the issue of cutting the deficit rather than having tax cuts (48%/49%).

  That Chancellor bloke – he’s got it so easy.

• jedibeeftrix 29th Feb '12 - 9:34am

  count me out.

  the rich already contribute an enormous sum of money to the exchequer relative to their numbers.

  it is always possible to soak the rich more, i just don’t believe it is legitimate.

• Andrew Suffield 29th Feb '12 - 9:55am

  Given the wider picture of higher VAT, and cuts in child and working tax credits, I’m afraid the Lib Dems’ “flagship policy” is just the same old “cut one tax, raise two more and hope no-one notices” con job that the Tories elevated to such a fine art in the 1980s.

  No, it’s a very careful and deliberate shift: those on low incomes should gain more from the tax cut than they lose from tax credits, while those on high incomes should lose more from tax credits than they gain from the tax cut. There is no concealment here: this simultaneous tax cut in one place (poorer people) and tax increase in another (richer people) is exactly what the poll question is talking about.

  (Like every tax adjustment, it is not perfect, and if a journalist searches long enough then they will find at least one example of somebody who gets shifted in the wrong direction – fiddling with the tax system is regrettably hard, and you have to make do with getting it right for most of the population)

• Caracatus 29th Feb '12 - 11:26am

  “on the lowest incomes (i.e. some part-time workers and people on benefits) are already out of income tax. Further allowance increases will not help them at all”

  Assuming their incomes and circumstances remain unchanged for the rest of their lives, then that might be right, but most people have fluctuating levels of income and expenditure throughout their lives. The idea that tax cuts should not be targeted at the poorest becasue they are too poor to benefit seems very pessimistic.

• Chris 29th Feb '12 - 12:28pm

  “The idea that tax cuts should not be targeted at the poorest becasue they are too poor to benefit seems very pessimistic.”

  No one said they _shouldn’t_ be targeted at the poorest. What’s being pointed out is that they aren’t. This would be a flat-rate handout to all basic-rate taxpayers on £10,000 or more.

• LondonLiberal 29th Feb '12 - 1:12pm

  jedi – “the rich already contribute an enormous sum of money to the exchequer relative to their numbers.”

  eh? what has their numbers got to do with anything? it’s their wealth that matters.

• jedibeeftrix 29th Feb '12 - 1:38pm

  broadly speaking they are welcome to their wealth.

  it may be a minority opinion around here, but i consider it damned illiberal to keep on piling on taxes on the rich as if they are justified full stop.

  if we are willing to explicitly state that support a higher imposition on those with the broadest shoulders, as a temporary measure in the face of the current crisis, with the intention to scrap these extra measures in 2015, then i can accept that.

• Oranjepan 29th Feb '12 - 1:40pm

  @Stuart Mitchell
  “the Lib Dems’ ‘flagship policy’ is just the same old ‘cut one tax, raise two more and hope no-one notices'”

  Yes, it’s about increasing fairness and reducing wasteful overly-bureaucratic complexity within the tax system to provide greater value for money and free up funds which can then be targetted at those who most need it – the party has long campaigned on the idea of a ‘tax switch’ on these grounds.

  I guess being consistent on principles is a bad thing, especially when it comes to unaffordable policies like opposing student fees and a graduate tax isn’t everything the NUS called for, right? Blindly ignore circumstance to keep up appearances or make a positive difference within the constraints of reality – you decide.

  Again you’re partly correct only in that that raising allowances mainly doesn’t affect those on the lowest of low incomes, since full-time pay on the minimum wage is about £11,800. LibDem reasoning is to create a link between allowances and the minimum wage, although our spokespeople have largely been silent on this principle because we need tory votes in the commons to introduce it as Labour seem dead-set against fairness.

  Actually I hope everybody notices, because when they do they’ll see that we are delivering effective policy solutions rather than the empty utopian rhetoric of much of the current internal and external opposition.

• Oranjepan 29th Feb '12 - 1:45pm

  @jedi
  Liberalism uses the language of fairness, not the language of punishment – so I sometimes struggle how your comments apply.

  It may therefore be helpful if you could expand on your ‘broadly spoken’ emphasis of ‘piling on taxes on the rich’ to see how you distinguish between valid and invalid justifications for taxation.

• J Mitchell 29th Feb '12 - 1:46pm

  You may support tax cuts for the lower paid but if your Tory coalition partners don’t then that’s the end of the matter.

• jedibeeftrix 29th Feb '12 - 2:13pm

  i rather thought liberalism was about equity and justice………

  rich people already a great deal more tax than they recieve in benefits:
  http://www.bbc.co.uk/news/uk-politics-13633966
  http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm:77-231970

• jedibeeftrix 29th Feb '12 - 2:16pm

  or, more succintly:

  http://www.fcablog.org.uk/2011/09/the-tax-paid-by-billionaires-and-secretaries-the-view-from-the-uk/

• Matthew Huntbach 29th Feb '12 - 2:36pm

  I agree with the comments that this looks like a question worded to get the desired answer. I suspect the way people would answer it depends on whether they think “people on high incomes” means them – and they would tend to think it doesn’t. Once concrete proposals are put in to tax “people on high incomes” not only do those who are hit turn against the idea, but so do plenty of others fooled by the right-wing press’s use of terms like “the middle class” to mean the wealthiest 10% (and quite often even a smaller proportion right at the top).

  Note also that “people on high incomes” is not the same as the “wealthiest” – if one’s position is that tax should be shifted from income to wealth one might want to say “No” to the question even if one does support the idea that our tax system should be made more rebalancing than it is at present. One might also say “No” to the question if one’s position is that those on high incomes should be taxed more but the money raised should be spent on protecting public services rather than tax cuts to those in the middle. Note that raising the tax threshold to £10.000 benefits not just those who are taken out of income tax altogether, but also all those higher up who get a smaller proportion of their income falling in the taxable bracket and who don’t get hit by higher rate taxes much higher up. So, if welfare spending is being cut, it DOES mean a shift from the poorest to the middle.

  There is also the philosophical line that everyone who benefits from the state should pay something towards it. Actually, I feel this is covered by the form of income tax called “National Insurance”, and I do not think we are proposing to take low earners out of paying that.

  The great problem here is that people will happily vote for lower taxes and higher government spending and the government keeping a balanced budget, without seeing the contradiction. Sadly, politicians on both left and right have been happy to pander to this, which contributes a lot to the mess we are in now. All my life I have wanted to see serious politics developed here which can talk straight to the people and say the most pressing concern of government is balancing spending and taxation so if you want one you have to have the other, if you want to cut one you have to cut the other. Politics here seems to be largely about the governing party shouting out one side of the balance and the opposition shouting out the other – and the result has been people dismissing politicians as dirty rotten liars because when the opposition becomes the government it has to turn around what it was saying before.

  Here is where I despair of the left in this country because by participating in this game they have allowed politics to be pushed to the right. It is the left which most needs the state, so it is the left which has most to lose if people are turned away from democratic politics on the grounds “all politicians are dirty rotten liars”. It doesn’t bother the right if there are fewer political activists and fewer people voting, because they use their power and influence to get their voice across, they don’t need activists on the ground, and those who are left still using their vote tend to be those more likely to have opinions to the right anyway.

  Over the past few decades, the political right has played the game of having fringe groups “thinking the unthinkable” – talking about economic policies which are to the extreme economic right, which has the effect of making more moderate right-wing economic policies look more reasonable and become more accepted than would otherwise be the case. See how David Cameron has managed to get the label of being a moderate, I even find many Liberal Democrats assuming it, when the economic polities he is pursuing are way to the right of Mrs Thatcher’s. What is there on the left to balance this? Absolutely nothing. Just moronic protest movements who think having a demonstration or an occupation is an alternative to constructive thought and an alternative to the hard work of going out and wining votes.

  My point is right now even the smallest real steps towards what is needed for a really equitable tax system are being shouted down – I mean our proposed “mansion tax” as a particularly good example. That’s just a tiny step to reversing the way the Ponzi system of home ownership in this country has sucked wealth and hence power and liberty from the poor and give to to the rich. It’ s going to be shouted down if there’s no-one to our left proposing something like it but more radical and working to win hearts and minds for it.

• Oranjepan 29th Feb '12 - 2:51pm

  ok, equity and justice. I can dig that.

  However, if you’re saying it’s not right that tax doesn’t work like a bank account then I say you’re missing some of the invisible benefits recieved by the wealthy in exchange for a measure of redistribution (and I use this term in relation to power rather than cash).

  For example we might say that the wealthy are greater beneficiaries of efforts at crime prevention, or being more predominantly owners of business as the recipients of a state-educated labour pool with better health thanks to a national health service for their exploitation – which naturally boosts profits. Equally, investments in state infrastructure (among other things) accrue cumulative benefit towards the top of society.

  These secondary or indirect benefits are very difficult to precisely quantify, so they are easily overlooked in political discourse, and I’d caution you against it.

  Anyway, if we take a bank account as the comparison, then we might say that the general rule for those in the lowest income tax bands it is a deposit account, for those who can afford to pay for many of their own services it is a savings account, and those with major wealth tax is a long-term high-yield bond. Along those lines this comparison holds while the national credit rating is maintained securely.

  So the zero-sum analysis doesn’t apply.

  And this is why it is so outrageous that so many members of the wealthier classes derrogate their responsibilities both to the system of sound finance and the state which plays an active role within this system.

• LondonLiberal 29th Feb '12 - 3:13pm

  jedi – “broadly speaking they are welcome to their wealth.
  it may be a minority opinion around here, but i consider it damned illiberal to keep on piling on taxes on the rich as if they are justified full stop.
  if we are willing to explicitly state that support a higher imposition on those with the broadest shoulders, as a temporary measure in the face of the current crisis, with the intention to scrap these extra measures in 2015, then i can accept that.”

  The 50% tax rate is a temp measure, and you well know that. We need to plug the deficit and it’s a way of doing it. Don’t worry, the blue wing of the coalition are ensuring that the poor also geta good kicking. After all, we have an equal opportuntiies government – theyr’e screwing everyone!

• jedibeeftrix 29th Feb '12 - 5:50pm

  @ OP – “However, if you’re saying it’s not right that tax doesn’t work like a bank account then I say you’re missing some of the invisible benefits recieved by the wealthy in exchange for a measure of redistribution (and I use this term in relation to power rather than cash).”

  I believe the ONS figures account for many of those benefits.

  @ LL – “The 50% tax rate is a temp measure, and you well know that. We need to plug the deficit and it’s a way of doing it.”

  And yet this ‘temporary’ measure is a bargaining chip to help lever in a mansion tax! Will the aggregate tax burden on people afflicted with these schemes go up, down, or stay the same?

• Stuart Mitchell 29th Feb '12 - 7:54pm

  Andrew Suffield: “No, it’s a very careful and deliberate shift: those on low incomes should gain more from the tax cut than they lose from tax credits, while those on high incomes should lose more from tax credits than they gain from the tax cut. There is no concealment here:”

  Yes there is – you are concealing (by not mentioning it) the impact of the VAT rise, which utterly dwarfs any effect from the income tax changes for all income deciles except the very top one (and even there the only reason the top 10% have been hit is because Labour saw to it before they left office with their 50% top rate). As the IFS pointed out last year, the overall impact of the coalition’s tax policies has been regressive.

  I’m afraid your response is a classic example of the very thing I was criticising – focusing on one or two specific tax changes to paint a rosy picture while concealing the wider picture. If you look at the government’s own impact analysis (see p 76 of http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf) it is very clear that the various income tax changes have little impact compared to the VAT hike. And this is despite the fact that the government’s analysis (as pointed out by the IFS and others last year) tries to downplay the regressiveness of Osborne’s two budgets by incorporating all the progressive measures that Labour brought in in March 2010.

  ” this simultaneous tax cut in one place (poorer people) and tax increase in another (richer people) is exactly what the poll question is talking about.”

  Actually the question talks about “people on high incomes”. The Independent takes this to mean “the rich” while Stephen Tall refers to “the wealthiest”. Yet you take it to mean the people who are losing out from tax credit changes. Actually the biggest losers in the tax credit changes are families with part-time workers on 16-24 hours per week. The next biggest losers are those households with a combined income between £26,000 and £41,000. These people are not rich.

  ” if a journalist searches long enough then they will find at least one example of somebody who gets shifted in the wrong direction”

  You make it sound so rare. In fact, the increase in WTC hours threshold alone will affect 212,000 households, with 470,000 children between them.

• Oranjepan 1st Mar '12 - 3:14pm

  @jedi
  the ONS figures you cite explicitly do not account for secondary and indirect benefits paid for through taxation.

  @Stuart Mitchell
  the VAT rise is a red herring, as household are more than capable of varying their discretionary outgoings. The definition makes a mockery of the argument.

  Anyway the limited banding and exemptions of VAT rates mean there is massive scope for tailoring a more progressive form of sales tax – why, for example, are 5-star hotels banded together with 2-star hotels? That Labour also refused to apply the progressive potential for VAT (they even want to levy it on tampons!) shows where they stand.

• Stuart Mitchell 1st Mar '12 - 8:02pm

  Oranjepan: “the VAT rise is a red herring, as household are more than capable of varying their discretionary outgoings.”

  Perhaps the Treasury should employ you to do their impact analyses then – you could simply erase those big nasty dark green “indirect tax” blocks in the chart I refer to above, and all will be well!

  “they [Labour] even want to levy it [VAT] on tampons!”

  Eh? VAT has been charged on tampons since its introduction in 1973 (government: Tory). In 2000 Labour did the right thing by cutting the rate from 17.5% to 5%. They wanted to abolish it altogether but were prevented by EU rules from doing so – the cut to 5% was the best they could do. Given the coalition government’s “war on women” I’m only surprised they haven’t put it up to 20% yet.

• Chris_sh 1st Mar '12 - 10:21pm

  @Stuart Mitchell
  I was aware that the EU stated that once VAT was applied on something then it could never be VAT exempt. However I’m confused by your statement that they could only take it to 5%, why couldn’t they just zero rate it (which is not the same as taking it out of VAT).

• Stuart Mitchell 2nd Mar '12 - 7:02pm

  @Chris_sh
  I don’t know all the ins and outs of the regulations, but reports from the time quote Dawn Primarolo as saying that 5% was, regrettably, the lowest they were permitted to redue the rate to because of the EU rules.

• Chris_sh 4th Mar '12 - 8:13pm

  @Stuart Mitchell
  Thanks.

  I was (still am) confused by the many layers of VAT regulations, however having had a nose around I would guess that they are classed as “necessary goods”, hence the 5%.

  Also as a result of nosing about, it was actually brought in as a requirement for tax harmonisation when we joined the single market, so it’s probably not correct to apportion blame to political parties as such as we joined after a referendum.